Business loan declined: affordability ratio
Your existing debt service plus the proposed new repayment exceeds the lender's affordability ceiling (commonly 30 to 40 percent of free cash flow).
Why the affordability ratio decides the answer
Lenders do not just check whether you can repay in theory; they test the proposed new repayment against your free cash flow after existing debt service. If the combined commitment crosses their affordability ceiling (commonly somewhere between a third and two fifths of free cash flow) the application is declined automatically, regardless of how clean your credit history is. The decline is about capacity, not conduct, which is why fixing it is usually a question of reshaping the request or the existing debt rather than waiting or repairing a credit file.
How to bring the ratio back into range
There are three practical levers. Reduce the ticket so the monthly payment fits. Lengthen the term so the same amount repays more slowly and the monthly figure drops. Or consolidate existing higher-rate debt first, freeing up cash-flow headroom before you add anything new. Some products also help by design: invoice finance advances against your debtor book and is repaid as those invoices settle, so it does not add a fixed monthly instalment to your debt service the way a term loan does. An iwoca flexi-loan only charges on what you draw, which can keep the monthly commitment lower.
What to do next
Build a twelve-month cash-flow forecast that shows the new repayment fitting comfortably, and use the affordability-ratio calculator to model it before you apply. If existing facilities are the constraint, look at whether they can be refinanced or consolidated; if the underlying issue is simply that turnover is too small to support the ask, see the low-turnover routing. FundBiz matches limited companies, LLPs and partnerships of four or more to FCA-authorised lenders; run the matcher to be routed to lenders and structures that fit your free cash flow.
Why this triggers a decline
Most UK SMB lenders test the new repayment against post-debt-service free cash flow. A ratio above the threshold produces an automatic decline regardless of credit history.
Alternatives that work
- Reduce ticket size
- Lengthen term to drop monthly payment
- Consolidate existing debt before reapplying
- Invoice finance (does not add to monthly debt service)
Lenders we route to
- Same mainstream lenders, after restructuring of the request
What to do first
- Build a 12-month cash-flow forecast showing the new repayment fits.
- Consider whether existing higher-rate debt could be consolidated.
- Reduce the ask, then revisit a top-up later.
Not for
Borrowers already at peak debt service; the answer there is restructuring, not new debt.
Run the matcher
Tell us your sector, ticket size and trading time. We score each panel lender and surface the ones most likely to approve given the decline reason above.
Open matcher →Last reviewed: 2026-04-26.